Attract members of the "creative class" to a city and they will create jobs and spur urban renewal. But that idea, championed by noted urbanologist Richard Florida, has a double-edged downside: increased economic segregation and less affordable housing. Economics correspondent reports on how Florida wrestles with that tension in his latest book, "The New Urban Crisis."

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JUDY WOODRUFF:

But first: the double-edged sword of urban revival.

Even as some cities are becoming ever more popular and desirable, they’re also becoming places where the middle-class and lower-income residents are getting priced out of the market.

Economics correspondent Paul Solman has the story. It’s part of his weekly series, Making Sense.

PAUL SOLMAN:

Looking down on Manhattan’s old meatpacking district, the High Line, a mecca for more than seven million eager tourists a year, astride a once-derelict spur of the New York Central.

A rail line shrouding the buildings beneath. As a result, rents were cheap and the cutting-edge marginalized moved in.

RICHARD FLORIDA:

Much of this area of Chelsea was historically a gay neighborhood. And they were gay men and wanted to do something which celebrated the history of the old gay neighborhood.

PAUL SOLMAN:

Noted urbanologist Richard Florida:

RICHARD FLORIDA:

There’s one of the old buildings still with the rainbow flag.

PAUL SOLMAN:

A remnant of a past that proved a harbinger of gentrification to come.

RICHARD FLORIDA:

Once they built the park, it became a draw, not of people, but for real estate developers. And they never anticipated that. No one anticipated the High Line would be a place that luxury towers would grow up around.

PAUL SOLMAN:

But have they ever. For nearly a mile-and-a-half, the elevated walkway now winds through towers full of luxury condos, over-the-top testimony to the urban revitalization that Florida famously championed in his 2002 book, “The Creative Class.”

RICHARD FLORIDA:

We’re going through, I think, one of the greatest economic transformations in history, from an old industrially, corporate-based vertical economy to a new knowledge economy. But the twist I try to add is, it’s also urban. It’s city-based. It’s clustered in cities.

PAUL SOLMAN:

Florida’s twist became gospel. Attract members of the creative class, and they, in turn, will create jobs, which will, in turn, renew and rebuild. And it happened. Just look at the High Line.

But what Florida now sees is the double edge of the advice he gave, and that so many followed.

RICHARD FLORIDA:

A bigger, denser city in general increases the rate of innovation, increases the rate of start-up, increases the rate of productivity. At the same time, the bigger, the denser, the more knowledge-intensive increases the rate of inequality, increases the rate of economic segregation, makes housing less affordable. So it’s a two-sided monster.

PAUL SOLMAN:

Those unintended consequences of urban revival are the real-world twist Florida wrestles with in his latest book, “The New Urban Crisis.”

RICHARD FLORIDA:

People want to park money in real estate, artists, the best art galleries in the world, commercial companies, real estate development firms, financial headquarters, tech companies, start-ups and companies like Google.

So, the second dimension is, I kind of call it a crisis of success. These places now become terribly unaffordable for anyone who’s not either a knowledge worker or a techie or a member of the super rich.

PAUL SOLMAN:

As a result, pressure on most of the city’s residents, now facing apartment rents and prices soaring as high as the buildings that house them, many actually unoccupied, because they’re assets for foreigners, parking their money, as Florida puts it, in real estate.

RICHARD FLORIDA:

You used to have stocks, you used to have bonds. Now owning real estate in a superstar city becomes another class of asset.

PAUL SOLMAN:

Rents in this building? Roughly $3,500 a month for a one-room studio apartment, $4,700 for a one-bedroom, $7,000 for two bedrooms.

SARA HOCHRAD:

I could not live in a decent Manhattan apartment by myself. I might be able to live in Queens or maybe outer skirts of Brooklyn these days, because it’s gotten very expensive there, too.

PAUL SOLMAN:

Sara Hochrad, a 31-year-old speech therapist who works nearby, lives across town with roommates, was hoping to move somewhere close with her boyfriend.

How much would you and he have to earn, just a guess, to be able to afford a $4,700-a-month apartment?

SARA HOCHRAD:

Maybe $150,000, $170,000. Like, and that’s to really cut down into the bare bones of what — how you live.

PAUL SOLMAN:

At least $150,000 a year. It was testimony like this that triggered Florida’s aha moment: the gradual displacement of all but the most successful types he’d long urged cities to attract.

RICHARD FLORIDA:

We did an analysis which looked at the amount of money in these three groups, the knowledge creative class, the working blue-collar class, and the service workers, had left over after paying for housing. The creatives had like $80,000 or $90,000 left over. The blue-collars had $30,000, and the service workers had like $15,000.

I realized that this urbanism, winner-take-all urbanism, it was benefiting one group much more disproportionately than the other two.

PAUL SOLMAN:

And, with ballooning rents, low-income workers are being squeezed out entirely, banished to the once-desirable suburbs.

It’s been happening for decades, of course: the inexorable pinching of America’s middle class, the move towards what’s been called an hourglass economy, with the prosperous in the top half, the less well-off in the bottom, and fewer and fewer Americans in between.

RICHARD FLORIDA:

If the old urban crisis was about the middle-class flight from the city to the suburbs, the new urban crisis is about really the disappearance of middle-class neighborhoods from our society.

PAUL SOLMAN:

Yes.

RICHARD FLORIDA:

What’s tragic about that is, the middle-class neighborhoods were really our launch pads for upward mobility and the American dream.

PAUL SOLMAN:

Thus Florida’s first epiphany: the growing divide within cities between the rich and rest, who are being forced out of town, though he also had a second insight, the divide between cities, winner-take-all urbanism, the winners, San Francisco, New York, the losers, cities like Detroit, Milwaukee, Memphis.

And even in these stressed cities, creative class clustering is beginning to segregate the rich from the rest. But wait a second. The winning cities simply followed Florida’s own advice, suggesting a pointed question about what he calls the new urban crisis. Did he help cause it?

RICHARD FLORIDA:

I think I really wanted to help cities understand that urban revival, but that urban revival, according to the data we now have, it’s 2000 to now where that urban revival goes into full-bore.

And I think I was not only surprised, shocked by the speed of it, and shocked by the way it put pressure on cities.

PAUL SOLMAN:

But then what, if anything, can be done to close the gap?

Well, one answer, building public transit to connect the lagging outskirts to jobs in the booming urban core. And, hey, the 34th Street and Hudson Yards subway station just opened in 2015.

RICHARD FLORIDA:

It’s spectacular, but if you look at most of the subway stops and transit hubs, Penn Station, they’re falling apart.

PAUL SOLMAN:

Penn Station, New York’s key commuter hub, is ever more haunted by delays and cancellations, the result of aging infrastructure.

But if you really modernize a city’s transit system, you run back into the double-edged sword of Florida’s advice:

The better the transit, the denser and more productive the city, the less its lower-end workers will be able to able to afford to live in it, the more of a rich enclave it becomes.

Well, yes, that may be true, Florida acknowledges, and so he says that today’s cities have to start insisting:

RICHARD FLORIDA:

If you want to build a tower like that, if you want to get the rights to create height and density, we’re going to make a trade. And the trade we’re going to make, in order for you to go up like that, you’re going to make affordable housing.

PAUL SOLMAN:

Affordable housing, the only real way to try to close the gap, says Florida. So, why not muscle developers to offer workers in their projects cheap rents, good wages?

RICHARD FLORIDA:

Why not have your tenants be the ones that are creating better, higher-paying service jobs, that are creating a family-supporting job, so we can have an inclusionary prosperity, and cities can say, we will trade density for good things that developers will do?

In order to get the density they want and the height they want, they have got to build affordable housing, and they have got to build a more inclusive community.

PAUL SOLMAN:

But, if they don’t, we’re left with the two faces of Florida’s prescient creative class advice.

RICHARD FLORIDA:

That’s the great contradiction of today’s urbanized capitalism. You know, if we want to have a productive city, an innovative city, a country that innovates and creates good jobs, we need them, but, at the same time, that the very thing that is driving our economy forward is creating these divides.

PAUL SOLMAN:

For the PBS NewsHour, this is economics correspondent Paul Solman, reporting from and below the High Line in New York City.